UK econ­omy shows ten­ta­tive signs of Q1 re­cov­ery

The Financial Daily - - ECONOMY & CONTINUATION -

LON­DON: Bri­tain's ser­vice sec­tor re­bounded in Jan­uary af­ter a snow-hit De­cem­ber and re­tail sales rose un­ex­pect­edly in March, data showed on Wed­nes­day, rais­ing hope of a de­cent pick-up in first-quar­ter GDP.

The pound rose and gilts fell on the data, as in­vestors moved to price a more than 50 per­cent chance that the Bank of Eng­land would raise in­ter­est rates in May.

In­vestors be­lieve the strength of first-quar­ter GDP data, due on April 27, will be cru­cial in de­ter­min­ing the speed with which the Bank of Eng­land raises in­ter­est rates from their cur­rent his­toric low of 0.5 per­cent.

Ser­vices out­put grew by 1.3 per­cent on the month -- its fastest monthly ex­pan­sion since July 2002 -- fol­low­ing a 1.1 per­cent de­cline in De­cem­ber, ac­cord­ing to the Of­fice for Na­tional Sta­tis­tics.

All five sub-sec­tors con­trib­uted to the re­cov­ery, with ho­tels and restau­rants up 4.4 per­cent on the month, trans­port up 1.7 per­cent, dis­tri­bu­tion up 1.4 per­cent, busi­ness ser­vices up 1.4 per­cent and gov­ern­ment ser­vices up 0.7 per­cent.

The fig­ures of­fer the first of­fi­cial glimpse of how the sec­tor, which ac­counts for more than three-quar­ters of the Bri­tain's econ­omy, fared in the first quar­ter of the year.

"At face value it is quite ro­bust," said Alan Clarke, UK econ­o­mist at BNP Paribas. "Growth in Jan­uary has made up for the ter­ri­ble De­cem­ber, but it is still early days to gauge the strength of first-quar­ter growth."

GAUG­ING THE UN­DER­LY­ING TREND Gaug­ing the strength of the re­cov­ery has been com­pli­cated by weather dis­tor­tions fol­low­ing Bri­tain's cold­est De­cem­ber in a cen­tury.

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